A general resource for employees and management alike, covering issues old and new in the law of Ontario employment relationships.

Monday, March 25, 2013

Are Partners 'employees' under Human Rights Legislation?

There's an interesting case out of British Columbia, which the Supreme Court of Canada recently agreed to hear.

Put briefly, the case involves a lawyer, Michael McCormick, who was an equity partner of the Fasken Martineau DuMoulin law firm for over thirty years, until he was forced into retirement by operation of the partnership agreement at his 65th birthday.

He brought an application to the B.C. Human Rights Tribunal, alleging age discrimination in employment, and Faskens sought to have the application dismissed because...it wasn't an employment relationship. He was a partner, not an employee. Ordinarily, at law, that's a pretty academic distinction. But Human Rights legislation often gets interpreted more broadly, and discrimination in 'employment' often captures things not strictly within a conventional employment relationship.

The Tribunal concluded that, for the purpose of the Human Rights Code, a partner is an 'employee' of the partnership. On an application for judicial review by the firm, the British Columbia Supreme Court agreed with the Tribunal.

However, the British Columbia Court of Appeal did not agree, concluding that it is a 'legal impossibility' for a partner to be employed by his own partnership. They concluded that the Tribunal does not have jurisdiction to hear the application, and this is the matter being appealed to the Supreme Court of Canada.

It's easy to see McCormick's argument, in broad strokes: He was one of 60 equity partners in the Vancouver office. He was not the managing partner. He had a vote in major decisions of the firm, but a relatively small voice. He was largely beholden to the other partners in terms of the partnership agreement itself, and he had a boss for all intents and purposes. It looks, in many respects, like an employment relationship. And the fact that he was a partial owner of the firm, and had a vote, doesn't necessarily distinguish it from employment relationships: Outside of professions such as law, many partnerships incorporate companies, which in turn hire the members of the partnership. (So if I wanted to start a business with my three closest friends, we would probably incorporate, and the corporation would hire each of us. And I would then be an 'employee' of the corporation, despite my essential role as one of the operating minds of the business, and my one-quarter equity share in the business.)

Ultimately, the argument that his role is akin to an employment relationship is compelling, and primarily so because it looks very much like the firm fired him.

And, from a policy perspective, there are concerns running much deeper: If partnership in a firm is not an employment relationship subject to the Human Rights Code, then the consequences are broader than mandatory retirement issues. Ejecting partners - or refusing to invite them into the partnership in the first place - because they have children, or are married, or are women, or are racial minorities...it would all be fair game. Given the reputation that law firms have regarding employment equity, that isn't exactly a notion that I expect the Supreme Court to embrace.

Incidentally, this would have a relatively limited impact in Ontario. Ontario's Human Rights Code is more broadly drafted, prohibiting, among other things, discrimination in contracts. That particular prohibition isn't exactly the same as the prohibition against discrimination in employment, but the differences are not particularly large.

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